2 Fracking Ingredients You Should Know

The various recipes of fracking fluids had been shrouded in secrecy for years. Some say the ingredients are toxic, while others say they are completely safe. About the only thing we know for sure is that the exact mix can vary depending on the shale to be fracked, even in the same state.

What we do know is that according to Range Resources , "Roughly 99.9% of the fracturing fluid is water and sand, [and] the rest is a blend of common chemicals that are part of our everyday lives," which, according to the Groundwater Protection Council, is essentially "soap." Now, I'm not here to debate exact chemicals, nor am I going to ponder that last 0.1%. Instead, I'd like to look at two of the key ingredients that, as an investor, you should know.

The glue that holds everything together
Did you know that one of the key ingredients in fracking fluid is guar? Do you even know what guar is? Would you believe me if I told you that you probably eat it on a hot summer day and probably brush your teeth with it every day? Believe it or not, guar is a bean commonly grown in India that's used as a thickening agent. We also commonly ingest it in ice cream or toothpaste, while energy companies use it to thicken fracking fluid.

In fact, guar is so important to the industry that oilfield services company Halliburton's financial results were dinged after the company got hit by a huge increase in guar costs last year. It got so bad that the company began to build a stockpile and ended up buying too much of it at too high a price.

Halliburton's working on its own product, PermStim, with which it hopes to reduce the industry's reliance on guar. In fact, the company believes this product will put a floor on the price it will have to pay for guar in the future. If guar does spike again, it'll make the Halliburton solution a much more economically compelling alternative for drillers.

The company also has another product, CleanStim, made with ingredients sourced from the food industry. The non-toxic fracking fluid, although more expensive than traditional fracking fluids, is the company's answer to concerns about the chemicals contained within fracking fluid.

For Halliburton, the bottom line is moving past the margin pressures from guar. By developing its own products, the company is less exposed to another spike in guar costs. While that means guar will probably dwindle in its importance as an ingredient in fracking, it remains an area to watch especially for Halliburton investors.

Propping up production
Another important ingredient that's often overlooked is the vast amount of sand used in fracking. Sand or other "proppants" make up between 5% and 7% of the average frack job for a company like Range Resources (which, incidentally, does disclose all of the the fracking ingredients of each well on its website). Proppants are used to keep the fractures open so that gas can escape and go up the well. In addition to naturally occurring sand, other proppants such as sand coated with resin or ceramic are also used. These cost a bit more, but they offer a more uniform size to enable oil and gas to flow through more freely.

A number of companies are piggybacking on the shale boom and are cashing in by selling proppants. Among them are sand producers Hi-Crush Partners and U.S. Silica Holdings , as well as ceramic maker CARBO Ceramics . Each offers investors a unique way to invest in this key component of fracking fluid.

Hi-Crush Partners, for example, is a master limited partnership, offering investors the opportunity to collect a high distribution with future growth from expansions and increased demand from drillers. The partnership owns interests in two sand deposits with low-cost operations secured by long-term contracts with a handful of top oilfield service companies. U.S. Silica, on the other hand, offers diversity outside fracking, as its sand is sold to a variety of commercial customers to be used in a range of products, including glass and building products. The company has 13 facilities, more than 200 products, and 1,400 customers. While it's not the pure play on frack sand like Hi-Crush Partners, it does offer investors more security through its diversity.

CARBO Ceramics offers investors a unique opportunity to invest in the innovation of energy. Because ceramic proppants are highly engineered to be of uniform size, they offer maximum porosity, or allow for more oil and gas to pass through the fracture. This is important, because ceramics can yield a 20% to 30% incremental increase in production while also boosting the estimated ultimate recovery by 30%. The more gas that energy companies can recover, the higher the potential profits per well.

Foolish bottom line
While fracking gets a bad rap, most of the ingredients are actually fairly common materials. Investors can oftentimes earn uncommon profits from the most common businesses. The's certainly the case when it comes to investing in companies that produce these key fracking ingredients.

Of course, investing in the energy boom isn't as simple as I'm sure we'd all hoped it would be. There are many moving parts and factors to consider. That's why it's important for invest to stay informed. Fracking is probably not going anywhere -- on the contrary, its usage is likely to continue.

That means just one thing: more work for Halliburton. As the industry keeps on fracking, investors would be wise to consider Halliburton, one of the top companies in the business and one of those most in tune with the domestic market. To access The Motley Fool's new premium research report on this industry stalwart, simply click here now and learn everything you need to know about how Halliburton is positioning itself both at home and abroad.

The article 2 Fracking Ingredients You Should Know originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Halliburton and Range Resources and owns shares of Hi-Crush Partners. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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